tv Bloomberg West Bloomberg August 26, 2016 11:00pm-12:01am EDT
>> i'm mark crumpton. you are watching bloomberg west. let's begin with a check of the headlines. sharp aftershocks have struck in the italian city of amatrice, and at least 278 people are confirmed dead. a state funeral will be held saturday and flags will be flying at half-staff on all public offices. in bolivia, striking miners reportedly kidnapped and beat to
death the interior minister. it is a protest over mining laws. and next month vice president biden will hit the road to campaign for hiring clinton. the president will also be in philadelphia september 13. both are critical battleground states. and donald trump's campaign now has its own mobile app. users can earn point by donating to the campaign and sharing messages. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. "bloomberg west" is next.
emily: i'm emily chang and this is "bloomberg west." coming up, twitter's long-awaited anti-harassment tool. does it do enough? plus spotify and its longstanding feud with apple. we had to new zealand to hear why he wants the next chapter of his legal fight livestream. a $4.3 billion conclusion to the years-long question, who wants to buy the cloud company rackspace? the company apollo. paying a 30% premium over before takeover talks heated up this month. all the details from new york. m & a talk around rackspace has been going on for years. what did it take to get to this point?
>> you're right, this has been floating around for quite a long time. they were in early player in the cloud space -- they were an early player in the cloud space. they were in high-flying, rapidly growing company. then a.w.s. steps in in 2013 and they cut their prices seven times that year and it became clear that rackspace just wasn't able to keep up the next year they hired morgan stanley to look at strategic options for them. now more a manager of cloud services. emily: obviously they've been trying to make a business transition. going private may help them make that but talk about where rackspace fits into the cloud space? >> they are certainly a second tier player. them and a lot of. other smaller cloud providers
have are not been able to compete because they do not have the strength. gigantic companies, they need hundreds of thousands of computers to build these services and buying it in such huge volumes gives them very good relationships with their vendors, meaning they can get good prices and pass that along to their customers and the smaller guys like rackspace just cannot compete with that. emily: we'll see if they can do better in a private setting. thank you for that. and turning to the fight between spotify and apple. bloomberg's lucas shaw broke the story.
is this as petty as it sounds? >> i guess it depends from what perspective you are looking at. spotify's argument would be look, if you are going to make an exclusive agreement with apple and make people come to them, we're not going to work with you but if you are an emerging artist and want to break a new song on vane loads, it feels wrong to have this company worth $8 billion, $10 billion, tell um we're going to make your life miserable if you put one song on this radio show. emily: is it legal what spotify is doing? >> that, i'm not sure. it will definitely invite some antitrust scrutiny but it's such a new space and it would be really hard to prove, i imagine. i did get a message from a
friend of mine who is a lawyer and works on cases like this to say he is fascinated and wants to know more. so we'll see. emily: what has apple done to kind of invite this sort of behavior? we know apple music didn't get off to a great start but they're overhauling it and we're expecting a big sort of redo. >> yeah, apple invited it because they've made these exclusive deals a corner stone of their effort to catch up to spotify. spotify is the number one paid music deal in the world, apple is next. but when they get an exclusive with someone for a week or two or three weeks, that means that that music is not on spotify and that is hurtful to spotify's business and there are some that
think the deals are bad for the music business. lucien gray sent out a memo to staff this week saying -- we're not going to do any more long-term exclusives after one of their artists, frank ocean, managed to make a direct exclusive deal with apple. emily: what's the gain in terms of listeners? >> the last time, apple said they had 15 million and they added that in a year. spotify said in a billboard they have 39 million, but that's over eight or nine years. emily: all right. lucas shaw, covering entertainment for us in l.a., and of course we're expecting an apple event in early cement -- early september where we may get to see the new apple. -- apple music.
turning now to twitter. after years of criticism that it does not do enough policing on its site, news that now they will do more. we have been talking for a long time about how big a problem this is. tell me how this solution works and whether you thank you it's strong enough. >> this is something twitter has been debating for months. this would allow people to put a filter in their timeline so they could block out racist words, attacking words, sexist words, slurs and basically not have to see some of the worst of the internet as it's coming to them. it's the first proactive filter instead of waiting to report after the fact the attackers. emily: you've been on the receiving independent of this. i've been on the end of it every single day. you are saying we're the ones who will have to decide what words we don't want to see and
what tweets to filter out? >> in an ideal world twitter would be able to do some sort of technological solution that would make sure these things don't hit the internet before they do. it's just not that easy to do in real time. emily: right. >> and yeah, so people who have what- what have to decide words they don't want to see and as we've discussed, i don't think it would be foolproof. people could misspell things or find creative ways to insult you instead. it's really a difficult problem and twitter has been working with outside counsel ever since february had they established it to try to preview their new upcoming products and try to get feedback and they're just not there yet but they say they'll have updates in a couple of weeks. emily: one of the potentials is that the people doing the harassing are still writing these twits and they're still
being put out there even if you -- still writing these tweets and they are still being put out there even if you and i are not seeing them. does that really change or combat the problem or the real issue? >> the one thing it could help is make the harassers less effective because one of the things they really want is to rile you up, respond and get angry and block them. emily: you don't respond, do you? >> i know. i do block them and they respond and say oh, ha ha ha, you blocked me. and they feel good about that. but there are definitely trolls out there making memes with your photos, tweeting out your personally identifiable information, attacking members of your family. when it gets to that level that is kind of stuff you want to see and be able to deal with. so it's definitely not the full solution. just something twitter is working on, debating. hopefully there is more to the package.
emily: how much do you think this problem is undermining the broader business in general? overall we've talked about user growth issues and new monetization issues, the stock price is suffering. how much is this harassment problem contributing to the overall picture? >> i think it contributes to a majority of the bad publicity about twitter. it's caused several high profile people -- there was a "new york times" reporter who had to leave earlier this year for a barrage of anti-semitic tweets. leslie jones, the actor "from ghostbusters," was forced off twitter after she got a lot of racist and sexist tweets posted about her. emily: and then she had stuff posted about her on line? >> yeah. and it can be a horrible space. a lot of this happens anonymously and you can block
these people and they can keep coming back and doing it under a different name. i think it's going to be a constant battle. it's hurt their user retention, not user growth. emily: well, thank you for that story you broke. another story we're watching, facebook is responding to controversy earlier this year over whether the editors silenced news stories on conservative news. facebook said it will stop using a team of contractors that sorted the news, but facebook had already internally conducted an investigation and said it found no bias. later this hour, how easy is it to hack into your car? the rise of so-called white hat hackers focused on the auto industry. this is bloomberg.
emily: zurich is aiming to be europe's next major tech hope. the city is one step closer to achieving that goal with the launch of a tech accelerator called kick starter. it will help develop startups from 30 countries, including -- from 19 countries. caroline hyde has the story from berlin. >> when thinking of tech hubs, zurich does not really come to mind and the swiss city is trying to change that, funding a new kickstarter accelerator. this was unveiled earlier this week backed by credit suisse and
big tech companies looking to help entrepreneurship in the city. one told us why it could be a win-win for her particular industry. >> what it hopes is to find talents, interesting new ideas, but also to help the startups with their ideas to try them out and also in the kickstart accelerator to do proof of concepts on their ideas. what that does is they can really test if their solution works, what it takes to bring it live and to implement it in a large corporation like ubs and at the same time it enables us to see if that's a good opportunity. at the end of the day we want to see if these businesses stay on in switzerland and help create jobs here and help us to be a more efficient and better financial services offering
bank. >> kick started is -- a division of 2025. we spoke to the head of that company and he talked about the wall between their company and -- the war for talent between their company and the rest of the world. >> zurich is a very innovative city and industry. but probably in terms of the future, i think you are right, we are a bit behind the curve. why? probably because there has never been a real crisis here and at the end of the day, industries need crises to have urgency to change something. i am very optimistic. we need to work on the taxing questions. there is not a very favorable situation in zurich at the moment. you find a company, go into the
first financial round and let's say the company comes up to a valuation of $10 million, the founder has to pay fortune taxes on the $10 million so it's going to basically kill his company before it's really taken off. so we need to work on political and tech issues as well as we need to be a little bit more flexible and faster. but it started a year ago and basically 40 of the largest swiss companies have join the initiative and i think we have achieved quite a lost we started late but we're speeding up. >> digital europe begs the question of 2025. what sort of talent pool do you want? there is such a fierce fight for talent whether it comes to technology? >> the kind of, let's call it a
war of talent. i think that's the most important point. what we have discovered of course is the great system of schools and universities we have, be it here in zurich or in the french part of switzerland, lausanne, so we have great science and knowledge culture in this country and we're trying to create borders between the big universities and the startups and of course the big enterprises. this kind of bridging between science, education, and economic and industrial companies is very important. >> does brexit help at all? can you lure up startups from london? >> i think in the digital world we should not hope that anybody is going to be harmed so somebody else, another c.e.o. or cluster is taking advantage of
that. so far we have not seen any impact that brexit is creating kind of difficulty situation for the fin tech industry or cluster in london. it's probably too early to say but we all hope it's not going to happen because it's not going to help anybody. it's rather europe has to get stronger and stronger and stronger regards digitization compared to the u.s. >> so another city wanting in on the top tech hub. we'll see how that fares. emily? emily: carolyn hyde reporting from berlin. coming up, the vegan mayonnaise maker hampton creek facing fraud charges from the u.s. justice department. we'll dip into that next. this is bloomberg. ♪
emily: a story we're watching. theranos said it will appeal the decision to revoke its license to operate in california. they said it's made substantial progress to improving practices there, including new lab leadership. another start-up in silicon valley, hampton creek, the makers of vegan mayonnaise, ands facing aaise, now fraud investigation by the justice department with reports that hampton creek bought its own product around the united states in an effort to make the
mayo appear more popular than it is. when contacted, josh tetrick, the c.e.o. responded to bloomberg with the following statement. we have no reason to believe this is true. here to give us more details. olivia, who has been reporting on the story. what is going on here? >> well, this is a remarkable situation here. earlier this month bloomberg reported that the company had been purchasing its own products and a week ago the s.e.c. opened an inquiry, not an investigation, i want to be clear on that, into the potential of fraud or misleading investors and this morning bloomberg reported that the department of justice had opened an investigation into potential fraud. emily: right. what is the d.o.j. looking at? >> into the same things. they have more power pause they may be able to bring a grand jury, which allows them to get
more information and they can press criminal charges. emily: so this potentially escalates it to a criminal case, right? >> yeah. could be very serious. emily: one thing that surprised me is the d.o.j. took action so quickly. with theranos, it took months for it to be at least publicized after "the wall street journal" broke the initial story. why do you think this is happening so quickly? >> i really can't say if it's happening so quickly because i wouldn't know how the d.o.j., how quickly they normally move. what i've heard from my colleagues when they reported on these kinds of cases is that this is really quite fast. why, i just don't know. emily: you've been putting out a number of stories on this, looking at it very closely. i know you have been criticized for picking on the company and some employees are not happy
with you, yet some of your sources are from within the company. talk to me about how it all unfolded. >> this all started because i was really struck by hampton creek, what i thought was a beautiful mission, a really compelling founder who blew me away with his charisma. i was actually introduced to josh tetrick by an investor in hampton creek, and my intention was to write a story about this company that was doing something really impressive, to replace animal proteins with others and when you think about it, there are really profound sustainable impacts that can happen here. so i started with that intention, but as i started to do the profile of the company i essentially learned that there
mark: i am mark crumpton. you are watching "bloomberg west." a check of your first word news. a federal judge temporarily ruled the university of north carolina cannot block two transgender students and an employee from using bathrooms that match their gender identity. the plaintiffs filed suit, challenging a state law limiting protections for lgbt people. the judge says the injunction only applies to the plaintiffs, but said they also are expected to succeed in their claim that the law known as hb2 violates the federal title ix law that bars sex is commission in -- discrimination in schools. secretary of state john kerry says he and russian foreign minister sergei lavrov have
approached clarity on syria. they said the majority of issues needed to reinstate the cease-fire and improve humanitarian access have been resolved. sec. kerry: in the next days, our experts will meet in geneva to conclude the few remaining technical issues and to move forward, to take the steps necessary to build the confidence to overcome the deep mistrust that does exist on all sides. mark: secretary kerry says experts will remain in geneva in the coming days to finalize the remaining details. france's supreme court has overturned a town's burkini ban, a move coming after some muslim women were forced to remove body-concealing garments on french riviera beaches. the binding decision is expected to set a legal precedent for all the 30 or so french resort
municipalities that have issued similar decrease. -- decrees. the united nations children's fund, unicef, warned friday there has been a sharp rise in the number of refugee and migrant children stranded in greece. unicef says over 2200 are unaccompanied and vulnerable to exploitation. >> this new influx comes at a time when greece itself is really struggling to cope with its own economic challenges. public service has been cut back. and, of course, the influx has created an additional challenge to the system. mark: for the second time in as many days, a trial against brazil's president dilma rousseff was temporarily suspended after lawmakers began yelling at each other. president rousseff, who is currently suspended, will speak on monday. she is accused of breaking rules in her management of the federal
budget. she denies wrongdoing, and says lawmakers are trying to stage a coup. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. emily: this is "bloomberg west" let's look at the future of transportation now, as the auto industry charges toward connected cars and driver-free roads. not only is over deploying driverless cars to pittsburgh, but singapore is rolling out autonomous taxis in partnership with neutonomy. but as cars become more connected, they become more vulnerable to cyber security threats. i asked u.s. secretary of transportation anthony foxx if automakers are taking the threat seriously. sec. foxx: the automakers
themselves are doing a lot to make sure the systems are safe. i would like to see the industry do even more together, to make sure that across the system we are getting great safety. emily: but are they doing enough? joining us now from seattle, an experienced researcher with experience in car hacking, craig smith. thank you so much for joining us. your expertise here goes way back. you wrote a car hacker's handbook and you run the car hacking village at defcon. i would like to start, how big is the risk of a malicious hack on cars, and give me some specific examples of how this can happen? craig: the risk of malicious attacks vary. the more connected your car is, the more capabilities you have. you can have things where they are controlling steering columns, something of that nature. the realistic risk is probably more data-driven. an attacker is usually not
trying to control your car, as much as they may try to get information from your car. emily: so, how common are security vulnerabilities in cars, in general? i realize as we move to a more connected car world, the vulnerabilities might increase. craig: so, i would say, the more sophisticated they are, the more likely they are going to have, i guess, an increased potential for vulnerabilities. older cars, not necessarily, but if you plug something in, like an insurance dongle, something to monitor your teen, those have the ability to connect via cellular lines or your mobile phone, which can unlock additional risk you might not have when you purchase the car. emily: how easy is it for a potential hacker to get access? greg: it varies. it is still a relatively new field, so there's a lot of areas
of sophistication involved in car hacking. it covers the software aspect of things, electronics, mechanical pieces. so there's a decent amount going into security research right now. and i think for the most part, we are doing a decent job of being ahead of the game, kind of looking at potential risk as we move to more future automated systems. but there is still a lot more work to do. emily: now, as you mentioned, your company is doing a public service, testing planes and trains to make sure that they are safe. how open is the industry to when you tell them there is a problem, fixing it? i would imagine with cars especially, if you can't potentially update them over the airwaves, this could involve a big, costly recall. craig: it has gotten a lot better. they used to be very resilient to not hearing from outside people. i would say, over time, we have gotten solutions where they have
bug bounty, programs and places on websites where you can submit findings. we always tell the vendor right away when we tell something, and 45 days after that we tell the public what is going on. emily: on that note, and i realize this is a very different story, but there is a medical cyber security firm that recently found a vulnerability in pacemakers that made them potentially hackable. they didn't tell regulators, but they told a short seller. who do you tell first, when you find these vulnerabilities, and what is the path from there? craig: ideally you go to the vendor website, and ideally they have a bug bounty program or some submittal process to say, we found some thing we are concerned about, can you take a look at it and triage the problem? if you don't see that, and you are concerned,, there are groups.
you can contact me at rapid seven. we will get into the right hands of security companies to make sure it is handled appropriately. emily:emily: at any point would you go straight to regulators to report an issue? craig: we would not go straight to regulators. if there was some reason, there was a problem that jeopardize safety and nobody was doing anything, we may have to go to regulators. but, you know, like i said, i have seen a lot of people in the auto industry -- they really do care about safety. it's just a matter of figuring out how to communicate it sometimes. we work with them, when we need to, but it is not something we go directly towards. emily: on the question of safety. as we move into a more connected world, you know, is our safety under threat, as we are driving more connected cars, more autonomous cars, semi-autonomous cars? craig: i don't think there is a threat. there is more of a risk, from a security perspective, but newer vehicles are safer to drive.
the average driver is more likely to run into a regular accident, from a drunk driver, fallen asleep at the wheel, something of that nature. when we add more connectivity, we are increasing our risk of being attacked by hackers, but it's not necessarily going to cause an additional problem we can't solve. i would not recommend someone use an older vehicle as opposed to a newer vehicle, because there's still a lot of safety pieces you would be opting out of. emily: so how do you see self driving cars changing security risk, especially as you have google, ford, gm, all these different major companies working on them? craig: it's interesting. we have semi-autonomous cars at right now, where you have a piece where part of the car will react for you maybe the braking, but you are still in charge of most of it. when we moved to fully
autonomous cars, it is not necessarily worse, simply because those cars don't rely on humans. in order to do that, they use multiple sensors, and when you have multiple different types of sensors in a vehicle, with the understanding the pieces inside could be wrong, the internal network is not trusted, which is a better state to be in than we see with corporate networks and current vehicle systems, were once you are inside the car, any information is considered a trusted peas of information. self driving doesn't trust as many pieces of information, and that is a better starting point. emily: so software and cars are less hackable? craig: they will be more difficult to hack, when done correctly, because you would have to attack a lot of sensors at the same time. it's like humans having five senses. if you want to do the perfect illusion, you have to fool all five senses, so you would have to do the same with a self driving car. emily: craig smith, thank you so much.
fascinating stuff you are working on. now to trending. two car hacking experts have been musing over the ethics of hacking in the public interest. in july 2015, they found a way to gains wireless control of jeep cherokee, leading fiat chrysler to recall 1.4 million vehicles. this week, a medical device maker's shares tumbled when it was found they were vulnerable to hackers. the investigation of jeep cherokees also cause a similar fall in shares. chris asked on twitter, i wonder if it would have been illegal for charlie and i to short fiat chrysler stock? interesting question. coming up, the next chapter of kim dotcom's legal saga will begin. we go to new zealand to find out why he wants his hearing live streamed, next. ♪
emily: flamboyant tech entrepreneur kim dotcom will head back to court next week to challenge his extradition to the united states. more than four years after authorities swooped in on his sprawling new zealand mansion, the 42-year-old continues to fight copyright charges related to his filesharing website megaupload. he and three others maintained their innocence, and want to share this chapter of legal proceedings with the online world. earlier on twitter, dotcom said he wanted to allow the high court to allow live streaming of the six weeks of extradition hearings. a day later, he said the u.s. government has asked the new zealand court not allow global live streaming.
for more, we are joined by kim dotcom's lawyer, from auckland, new zealand, who has flown there for the proceedings. great to have you back on the show. first of all, sounds like the live streaming will not happen, but why would you want the world to see this? ira: well, we don't know whether it's going to happen or not. the ruling still has to happen. we will be given without on monday. in terms of why the live streaming should happen, this is a global case involving the internet, with important public policy issues. the future of user-generated content sites, cloud storage sites, is at issue. in the issue in this case is whether or not the government can hold kim dotcom and megaupload responsible for the acts of its users. that's not only an issue for kim dotcom and megaupload, but for companies like google, facebook, and dropbox, and all the consumers across the globe that use user generated content sites. if things don't go well for kim
dotcom in these hearings, it could chill user generated content sites. so people should be able to have access to the courtroom. that's the cornerstone of democracy. we are hopeful the court will rule in our favor. emily: i flew to new zealand last year to speak with kim an speak with you. i want to take a quick listen to what he had to say back then. kim dotcom: i think this case is going to go on for a very long time. i have prepared myself for that. you know, mentally, that this will be a fight, for a very long time. emily: what do you think is the most likely outcome, from these current proceedings? how long do you expect the case to go on for? ira: we expect the case to go on for many years. we fully expect that kim dotcom and the others will prevail. in order to extradite kim dotcom and the others, the government has to show something that is known as dual criminality, that
the allegations have to be a violation of both united states law and new zealand law. they are trying to hold kim dotcom responsible for the acts of cloud storage users, what is known as secondary copyright infringement, and there is no statute for secondary copyright infringement in the united states or new zealand, and new zealand has an untested criminal safe harbor for internet service providers, which protects kim dotcom and any others from any user generated content. emily: but a judge already ruled in december that there was a case for extradition here. so why do you think another judge would be convinced to reverse that decision? ira: we are not going to sugarcoat it. we think the judge got it wrong. these are questions of law. we can assume every fact the united states says is true, and kim dotcom still prevails. one should not have to disprove criminal allegations in a criminal safe harbor, or it would render the safe harbor illusory.
we're not saying that kim dotcom or any others did anything wrong, but this is a very easy case if the court applies the black letter law. so we think the court got it wrong, and we're hoping the high court will get it right. emily: now, we know that kim is a larger-than-life character. he's very out there on social media. you and kim have been pretty out there, in terms of talking about your strategy on social media. aren't you worried? ira: not at all. in fact, the notion we want this live streamed means we are very confident in our case. anyone who opposes live streaming is not only opposing access to the courtrooms and democratic values, but also has something to hide, so we find it quite ironic that the united states is opposing that. so we look forward to the entire globe being able to watch the proceedings, and then make a decision on the quality of our legal arguments.
it's a public interest case, probably the most important public interest case in the history of the internet, because it's the first criminal case against a user generated content site that is a cloud storage site. emily: obviously a lot of broader implications here for the copyright world, around copyright issues. ira rothken in new zealand. we will be following this proceedings next week. thank you so much for joining us. this weekend, we will bring you some of our best interviews of the week, including our extended conversation with the cofounders of reddit. coming up, firebreathing dragons, a full-size king kong, and lots and lots of dinosaurs. all in a day's work for one australian robotics studio. we would explain how a jurassic park-like idea sparked a real business, next. ♪
emily: if you have seen a huge, lifelike robotic creature at a museum or a live show in recent years, is a good chance it is the work of melbourne-based creature technologies. they have made firebreathing dragons, a full-size king kong, the mascots for the sochi olympics, and lots and lots of dinosaurs. in this segment of hello world australia, ashlee vance gets a private tour of creature technology's workshop and takes a dinosaur out for a spin. ♪ >> welcome to jurassic warehouse.
>> this is a stegosaur. for the jurassic world exhibition. this is our t-rex. she tends to steal the show. ashlee: i keep thinking one of these things is going to eat me. [laughter] sunny hails from melbourne and cofounded creature technology. since 2006, the company has specialized in making giant robotic animals, and has ended up as one of the biggest animatronics companies around. the creature team is made up of movie special-effects artists who needed work during down periods, and their first project was a live show called "walking with dinosaurs," which ended up as the highest grossing touring
event in the world in 2010. they have been in high demand ever since, making rideable dragons, a full-size king kong, and cuddlier creations like these giant stuffed animals for the sochi olympics. vladimir putin still likes to cuddle the bunny rabbit on the right. >> it grew out of the show. there was something in this, bringing animatronics to a live audience. >> this is -- at the moment, we are skinning the creature, and the girls are putting in some scales. ashlee: each one of these creatures takes about a year to create. every detail of the anatomy is built from scratch, including the eyeballs, the hydraulic skeleton, and the lifelike fabric skin.
>> so it is very similar to a real creature. it has bones. it has muscle. it has skin. and how they work together, that's the trick, really. ashlee: to make the creatures seem more lifelike, the company's coders program nuanced movement routines. but i'm not here to watch a computer play with dinosaurs. i'm here to take a dino out for a spin. >> so this is a voodoo rig. i'm controlling the neck. ashlee: this is all homegrown? >> we built these for the live show 10 years ago, and this is our rusty workshop model. want to have a go? he is designed to be intuitive and smooth, so you can taken through his whole range, and he will go where you want to take
him. [laughter] ashlee: it's like having your own pet dinosaur. >> it's a lot of fun. ashlee: there were a couple new creations coming to life in the creature workshop that we were not allowed to show you. secrecy remains paramount in the vicious world of animatronics. but safe to say, the next time a dinosaur, giant plush bear, or say, an alien greets you at an amusement park, it came from this place, on the other side of the world. emily: you can catch the full episode of "hello world" at bloomberg.com. be sure to tune in next tuesday, when twitter cofounder ev williams joins us. he will be our guest host.